KANSAS CITY, Mo., Sept. 14 /PRNewswire/ -- Torotel, Inc. (AMEX: TTL), a leading manufacturer of magnetic components, today reported lower sales and an increase in net earnings as a result of a change in accounting principle required by the FASB during the three months ended July 31, 1993. On Sept. 1, 1993, the company also completed its acquisition of OPT Industries, Inc., a manufacturer of magnetic components and switching power supplies.
SALES DOWN DUE TO SOFT MARKETS; REQUIRED ACCOUNTING CHANGE INCREASES
EARNINGS
Net sales for the latest quarter were $1.6 million, 34 percent lower than the $2.5 million for the same period last year. Lower sales and fixed production costs caused a net loss before cumulative effect of change in accounting principle of $76,000, or 3 cents per share, versus earnings of $218,000, or 8 cents per share, for the comparable three months in 1992.
As required by the FASB, Torotel adopted FASB Statement No. 109, Accounting for Income Taxes, on May 1, 1993. This change in accounting principle increased earnings by $400,000, or 14 cents per share. As a result, net earnings for the first quarter were $324,000, or 11 cents per share, a 49 percent increase over $218,000, or 8 cents per share, for the same period last year.
COMMERCIAL MARKET FOCUS WILL REDUCE EFFECTS OF DEFENSE SLOWDOWNS
Discussing the quarter, Alfred F. Marsh, president and chief executive officer, said, "As announced in our year-end results release, we continued to see softness in defense electronics orders during the first quarter. While recent sales and quoting activities indicate business may be improving, it is too soon to tell. Over the past year, we have expanded our efforts in the commercial market, with the goal of reaching a 50/50 split between commercial and defense revenues by fiscal 1996. Ultimately Torotel's primary business will be commercial. The military market will be used as a revenue enhancer and the effects of any slowdowns will be reduced."
OPT ACQUISITION SUPPORTS COMMERCIAL FOCUS
Effective Sept. 1, 1993, Torotel acquired 100 percent of the common stock of OPT Industries, Inc (OPT) of Phillipsburg, N.J., through a negotiated merger of a subsidiary into OPT. A fund of $200,000 retired all of the pre-merger outstanding shares of OPT, and warrants to purchase 66,667 shares of Torotel common stock for $1.50 per share were issued to Chemical Bank New Jersey N.A. OPT manufactures magnetic components and custom design high-power switching power supplies. OPT, which now is a Torotel subsidiary, had unaudited revenues of $12.8 million for its fiscal year ended Oct. 31, 1992.
In connection with the acquisition, Torotel's bank debt and certain bank obligations of OPT were refinanced with a new lender. The new loan agreement provides for a total credit facility of $4,661,000 for the consolidated operations, of which $2,156,000 was available, subject to the lender's borrowing base formula, for future cash requirements after the closing of the acquisition. The company also agreed to guarantee OPT's continuing mortgage obligations in the amount of $1,189,000.
"After searching for the right acquisition for years, we are excited about the benefits OPT offers," Marsh explained. "About 55 percent of its revenues in fiscal 1992 came from commercial and industrial customers, which accelerates our progress toward focusing on this market. Torotel now will have access to new customers and markets because we were rarely in competition with OPT in the past. OPT has some unique products and technologies with excellent growth potential. OPT also has offshore manufacturing capabilities. In addition, Torotel's cost-efficient manufacturing approach can be transplanted to OPT to improve that company's operations.
"The excitement we feel at completing this acquisition, plus the efforts already in place to reach new commercial and industrial customers, will brighten Torotel's prospects not only in fiscal 1994 but for years to come," Marsh concluded.
Torotel, Inc. specializes in the design and high-volume manufacture of a broad line of precision magnetic components used in commercial and military electronics. These components, which include transformers, inductors, reactors, chokes, toroidal coils, and high power switching power supplies, are sold to original equipment manufacturers for use in telecommunications systems, digital control devices and avionics equipment. The company has a base of more than 700 customers.
For further information on Torotel by FAX, dial 1-800-PRO-INFO, ext. 155.
TOROTEL, INC.
Operating Data
(Unaudited)
Three Months Ended
July 31,
1993 1992
Net Sales $1,649,000 $2,490,000
Gross Profit $ 541,000 $ 969,000
Earnings (Loss) from Operations $ (46,000) $ 276,000
Earnings (Loss) before Income Taxes
and Cumulative Effect $ (76,000) $ 221,000
Cumulative Effect of Change in
Accounting Principle $ 400,000 $ ---
Net Earnings $ 324,000 $ 218,000
Earnings (Loss) Per Common and Common
Equivalent Share:
Earnings (Loss) before Cumulative
Effect $(.03) $.08
Cumulative Effect $ .14 $ --
$ .11 $.08
Weighted Average Common and Common
Equivalent Shares Outstanding 2,790,000 2,877,000
BALANCE SHEET DATA
(Unaudited)
July 31, April 30,
1993 1993
Working Capital $2,646,000 $2,891,000
Current Ratio 2.8 2.8
Total Assets $5,609,000 $5,396,000
Short-term Debt $ 467,000 $ 658,000
Long-term Debt $ 260,000 $ 290,000
Total Liabilities $1,733,000 $1,854,000
Debt-to-Equity 0.4:1 0.5:1
Stockholders' Equity $3,876,000 $3,542,000
-0- 9/14/93
/CONTACT: Al Marsh, president of Torotel, 816-761-6314; or Lynne Franklin, 312-266-7800, or Regina Ryan, 212-661-8030, both of the Financial Relations Board/
(TTL)

CO: Torotel, Inc. ST: Missouri IN: SU: ERN

PS -- NY048 -- 1761 09/14/93 12:24 EDT

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